Where Capitalism is a Thing of Beauty

13. August 2010, 18:06:13 | Chris Meyer & Julia Kirby

Over the past year, we’ve been researching a book on how capitalism will evolve now that its center of gravity is moving away from mature, western economies. Looking around the world for companies that hint at capitalism’s next phase, we’ve tended to focus on businesses that an economist would say belong to an “emerging” stage of development — an ambulance service in Mumbai, for example, or aircraft manufacturer in Brazil. It hadn’t occurred to us that the cosmetics industry might be a source of inspiration.

It’s an industry, after all, that is so easy to see as representing the ugly excesses of the old capitalism. Made up of large companies who spend billions to create brands that delude us with illusions of eternal youth, its main achievement has been to create marketing channels capable of selling elaborate packaging (as well as some useful products, we acknowledge) at huge margins. If the best argument for capitalism is that it allocates resources efficiently, the cosmetics industry would not seem to be Exhibit A.

But then we had the experience of talking with Luiz Seabra, the founder (and now billionaire chairman) of Brazil’s leading cosmetics company, Natura.

Natura is a success story on many levels. It is fast growing (2009 sales grew over 18 percent to top $2.3 billion, and net income grew 32 percent) and yields healthy returns not only for its shareholders but for the million-plus independent beauty consultants who distribute its offerings. Customers swear by its products, which aim to enhance their “well being and being well” with natural ingredients and innovative formulations. It’s a darling of social responsibility advocates for its commitment to ethical and sustainable sourcing. (See for example, this pdf.)

But if that sounds like the kind of success every company aspires to, Seabra himself seems to have no interest in being the typical corporate leader. He underscored that by quoting Joseph Campbell’s observation that “the privilege of a lifetime is being who you are” — a celebration of individualism he thinks applies to companies, as well. How many corporate executives do you know who make offhand references to comparative mythologists? But more important: how many really believe in forging some unique path, rather than borrowing best practices and fast-following?

Natura started becoming what it is when Seabra was a young man and connected an intriguing idea from his studies with the customer insights he was gaining in his fledging business. He told us that, spending time personally in consultation with clients, he began to appreciate better the meaning of cosmetics and fragrances in their lives. At the same time, he was turning over in his mind a lesson from Plotinus, a Neoplatonic philosopher who intrigued him. One particular phrase, “the one is in the whole, the whole is in the one,” was “hard to understand with my rationality,” he admits, but it spoke to his heart.

Over the years that followed, that seed of insight turned into a conviction that what he was building should not simply be profitable in itself, but should profit by being integral to a healthy system. That had all kinds of implications:

In going to market, it meant investing heavily in training its independent, Avon-Lady style associates, for many of whom Natura is a first shot at paid work. The company accepts that every year a third of them will move on, having learned how to do a job well.

In communications with customers, it meant stressing overall well-being, and refusing to exploit women’s horror of aging. Society’s distaste for growing old, Seabra believes, is (using Doris Lessing’s phrase) “one of the prisons we choose to live inside.” So although the rest of the industry scoffed — “they said we were completely crazy because you must create the impression that you can stop time” — he launched a skincare line called Chronos that celebrated the beauty and vitality of mature women.

In the heat of competition, it meant remembering purpose. When Seabra later saw huge billboards, on a trip to New York, by a multinational company promoting beauty beyond youth, he was momentarily irritated at the obvious rip-off of his concept. But he quickly reconsidered: “I thought, if this spreads in the world, then this is good for humanity.” Why, in that case, consider it one company’s property?

In procuring the natural ingredients for its formulations, it meant pursuing sustainability. Working with local growers in the Amazon, for example, Natura created a system that provided for their livelihoods and the healthy propagation of plants.

In the measurement of performance, it meant redefining “success”. The company became an early adopter of triple bottom-line accounting, and rewards its managers for social and environmental as well as financial achievement.

The list could go on, and the quest continues. Three times in our conversation, Seabra used the phrase “step by step” to describe Natura’s effort to be a one that reflects and honors the whole.

A skeptic might mistake Luiz Seabra’s philosophizing — his tendency, as he admits, to be “a little bit abstract and a little bit of a dreamer” — for a lack of practical discipline. But he thinks otherwise: “We should all, all the entrepreneurs of the world, be applying principles of philosophy. We should think of our companies not just as concrete operations, but as projects of the soul.”